Stakeholder Orientation and Operations Outcomes: Evidence from Constituency Statutes

K. Aral, Erasmo Giambona, L. V. Van Wassenhove
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Abstract

We study the effect of stakeholder orientation on operations decisions. For identification, we exploit a quasi-natural experiment that effectively reduced potential personal costs for executives pursuing stakeholder-oriented decisions, the staggered adoption of constituency statutes. Using a staggered difference-in-difference approach, we find that firms incorporated in constituency states (treated firms) are 15.9 percentage points (pp) more likely to hire a chief operating officer (COO) relative to firms in non-constituency states (control firms) post reform. We also find that treated firms engage more in operational decisions discussions and increase operational investments post reform. Importantly, a structural two-stage least squares approach reveals that these changes in operational decisions, operational investments, and COO hiring contribute to increasing firm value by 17.2%, 12.6%, and 9.3%, respectively. We further find that the chief executive officers of treated firms are less likely to be fired relative to control firms post reform. Altogether, our results suggest that constituency statutes lead to higher firm value by allowing executives to implement stakeholder-oriented operational decisions that were potentially personally too costly for them pre reform. To our best knowledge, our study is the first to identify a clear economic mechanism (i.e., the enlarged decision space for executives following the reform) through which stakeholder orientation, by affecting operations decisions, contributes to firm value. Our work contributes to the sustainable operations literature by identifying the separation between shareholders and managers as a fundamental determinant of responsible operations. Interestingly, while constituency statutes were intended to protect executives adopting stakeholder-oriented policies from shareholders’ sanctions, our findings suggest that these statutes benefited not only executives and non-equity stakeholders, but also shareholders. More broadly, our results indicate that policymakers need to assess the implications of regulatory changes beyond the targeted constituencies. Importantly, shareholders should recognize managerial freedom in operations decisions as an important value driver.
利益相关者导向和运营结果:来自选区法规的证据
我们研究了利益相关者导向对经营决策的影响。为了识别,我们利用了一个准自然的实验,有效地降低了追求利益相关者导向决策的高管的潜在个人成本,交错采用选区法规。使用交错差异方法,我们发现在改革后,与非选区州的公司(控制公司)相比,在选区州注册的公司(受待遇公司)雇佣首席运营官(COO)的可能性要高15.9个百分点。我们还发现,改革后的企业更多地参与经营决策讨论,并增加了经营投资。重要的是,结构性两阶段最小二乘方法显示,运营决策、运营投资和首席运营官招聘方面的这些变化分别使公司价值增加了17.2%、12.6%和9.3%。我们进一步发现,在改革后,相对于控制公司,被改革公司的首席执行官被解雇的可能性更小。总之,我们的结果表明,选区法规通过允许高管实施以利益相关者为导向的运营决策而导致更高的公司价值,这些决策在改革前对他们个人来说可能过于昂贵。据我们所知,我们的研究首次确定了一个明确的经济机制(即,改革后高管的决策空间扩大),通过该机制,利益相关者导向通过影响运营决策来促进公司价值。我们的工作通过确定股东和管理者之间的分离是负责任经营的基本决定因素,为可持续经营文献做出了贡献。有趣的是,虽然选区法规旨在保护采用利益相关者导向政策的高管免受股东制裁,但我们的研究结果表明,这些法规不仅有利于高管和非股权利益相关者,也有利于股东。更广泛地说,我们的研究结果表明,政策制定者需要评估监管变化对目标群体之外的影响。重要的是,股东应该认识到经营决策中的管理自由是一个重要的价值驱动因素。
本文章由计算机程序翻译,如有差异,请以英文原文为准。
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